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Who pays for the oil spill?

Long after the oil in the Gulf of Mexico stops leaking and cleanup ends, one question will remain: Who pays for all the damages?

BP promises to pay for the cleanup. But the damage goes far beyond the oil slick and the environmental messes left from the more than 200,000 gallons of oil a day flowing into the gulf.

From shuttered surf shops and vacant hotels to lost wages and trip cancellations, the cost of the Deepwater Horizon rig explosion continues to rise.

Officials with BP, which is already reportedly spending about $6 million a day on the spill, have said repeatedly they are "committed to pay legitimate and objectively verifiable claims for other loss and damage caused by the spill . . . including loss of earnings."

Sen. Bill Nelson estimated the economic damages to Florida would reach $3 billion. The Florida Democrat told the St. Petersburg Times on Wednesday that when he pressed the oil company about who would pay for the economic damages, the company told him, "As we assess the claims, we will deal with them as appropriate."

The magnitude of the oil spill creates a "huge cascade of bad things," said Robert McKee, whose Fort Lauderdale firm Krupnick, Campbell, Malone, Buser joined with other lawyers to represent victims. "The question is whether those claims are going to be paid voluntarily or is BP going to be compelled to pay."

If history is any indication, the battle over money will get as messy as the spill.

• • •

Federal law requires oil companies involved in spills to pay up to $75 million in damages to communities, in addition to all cleanup costs. The $75 million covers damages such as lost wages and lost sales at businesses directly affected by an oil spill.

Beyond the $75 million, oil companies pay 8 cents per barrel of oil into the federal Oil Spill Liability Trust Fund, created by Congress in 1986 and funded through the Oil Pollution Act of 1990. The fund provides $1 billion per incident for spill cleanup and community assistance.

The money helps cover damages to those directly harmed by the disaster. The indirect damages — such as the restaurant that loses income because tourism drops or the dive shop hit with dozens of cancellations because no one wants to swim in oily water — are trickier to deal with.

"There's a broad group of folks who can be affected by this," McKee said. If they have any potential of collecting money for their losses, "you've got to prove what your damage is."

For some, even an entire loss of their livelihood could go uncompensated.

"I don't think we are unclear at all that they're going to be devastated," Nelson said.

• • •

Past experience — from oil spills such as Alaska's Exxon Valdez disaster in 1989 to Tampa Bay's smaller crisis in 1993 — shows the battle with big oil can prove long and difficult.

"It's our ardent hope BP does the right thing," said Michael LeVine, Pacific counsel for Oceana.org, an environmental group against offshore drilling. "There are still effects from the (Alaska) spill on the environment. There are people whose livelihoods were destroyed."

A jury awarded $5 billion in damages to victims of the Exxon Valdez oil spill that dumped nearly 11 million gallons of oil in Prince William Sound. But nearly two decades after the spill, the U.S. Supreme Court reduced the payout to $500 million for business losses.

The 1993 oil spill that resulted from a boat collision at the mouth of Tampa Bay caused more than 300,000 gallons of oil to contaminate Pinellas County beaches. The spill led to a 45 percent drop in tourism and $5 billion in losses. About 1,300 businesses, workers and homeowners filed claims topping $30 million in a process that went on for years.

Businesses in St. Pete Beach, Treasure Island and Madeira Beach that endured the long process back then fear a repeat if oil starts washing up again.

Hotels lost business for four years as every big storm churned up thick oil buried in the sand, prompting visitors to check out early. Some hotels had to replace carpets several times.

"This is really scary," said Rick Falkenstein, co-owner of the Hurricane Seafood Restaurant in St. Pete Beach. "Big Oil ripped off a lot of people here last time. It put a lot of mom and pops out of business who were not sophisticated enough to document everything they lost."

Many businesses accepted the first offer from the oil company insurance adjusters even though their business had yet to recover. Others were confronted with hired experts used by the insurance companies to blame some of the lost business on an ongoing economic slump.

"You had to accept what they offered or hire attorneys to fight them in court," said Falkenstein's brother Bruno.

• • •

Another likely hurdle that will affect the flow of money: Who's at fault?

The cause of the explosion has not been determined, leaving many questions about financial responsibility unanswered.

While BP is responsible for the oil in the gulf, other companies will almost certainly play a role in the inevitable litigation. Halliburton was responsible for pumping cement to plug holes in the pipeline. Transocean is the oil drilling contractor whose rig exploded and collapsed, leading to the oil spill.

The United Commercial Fisherman's Association and Louisiana Environmental Action Network announced plans Wednesday to issue subpoenas to BP and Halliburton, requesting information about the cause and details about the spill.

Lawyers for the groups say BP is acting like oil companies in past spills, making it difficult to seek relief for those being harmed.

"BP and Halliburton have yet to release even the most basic information and data, such as the videos from the submarines that they are using to evaluate the oil flow situation," Stuart H. Smith, lead counsel, Gulf Oil Disaster Recovery Group, said in a statement Wednesday about the subpoena.

"Our clients consider this information essential in taking the steps necessary to protect the environment and human health, and to evaluate the interventions which can be taken to promote the maximum safeguarding of the Gulf Coast and its people."

Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332.

The latest

• On Wednesday, BP said it shut off one of three leaks in the gulf, but the company says it didn't affect the amount of gushing oil, thought to be about 210,000 gallons a day.

• A four-story containment dome is on its way to the well to be installed by Monday. If the untested plan works, it could keep oil from fattening the slick that threatens the coast from Louisiana to Florida.

• A command post to respond to any spilled oil that touches Florida's west coast is open for business in St. Petersburg.
Tampa Bay, 3B

Who pays for the oil spill? 05/05/10 [Last modified: Thursday, May 6, 2010 5:25pm]

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